The list of legal forms of non-residents the transaction with which are recognized as controlled is expanded

The list of legal forms of non-residents the transaction with which are recognized as controlled is expanded 150 150 Esquires

On December 24, 2019, Ukrainian Cabinet of Ministers  adopted a resolution “On Amending the Appendix to the Resolution of the Cabinet of Ministers of Ukraine dated on 4th July, 2017 No. 480” (hereinafter – the “Resolution”), which will come into force on January 1, 2020.

Extended List

The resolution expands the list of legal forms of organization of non-residents (hereinafter referred to as “the List of LFO”), that requires the following rules to make the transaction with them:

  • transfer pricing rules (whether or not such non-residents are related parties);
  • restrictions on the allocation of a part or the full amount of expenses for the acquisition of goods, works and services and expenses for the calculation of royalties (Article 140.5 of the Tax Code of Ukraine).

This restriction can be avoided by compiling transfer pricing documentation, which justifies the compliance of the conditions of these operations with the “outstretched hand” principle.

The following LFOs of the respective states are included in the List:

  • Austria – GmbH & Co.KG (Limited Partnership);
  • Germany – GmbH & Co.KG, AG & Co.KG, UG & Co.KG (all – Limited Partnership), GmbH & Co.KGaA, AG & Co.KGaA (both forms – Limited partnerships), GmbH & Co .OHG (Full Partnership);
  • Poland – p. z O.O. S.K. (Limited Liability Partnership), Sp. z O.O. S.J. (Full partnership).

Expanding the LFOs List is a summation of the discussion between the regulatory body and taxpayers on issue whether the transactions with non-residents of the above mentioned LFOs are subject to control with TPR (in other words, with those non-residents,who may actually not pay the profit tax, but there were no such non-residents in the previous list of LFOs).

The updated LFO List will be applied to operations carried out by the taxpayer from 2020.

Please note that the receipt from a non-resident, indicated in the list, of documents confirming payment of income tax by him in the reporting period, can serve as an argument for recognizing a transaction with such a non-resident as uncontrolled.

If you have any questions regarding the before mentioned information message, please contact our tax law practice specialists.

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